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Schlumberger, Wellbore Integrity Solutions Ink $400M Deal

Zacks Equity Research

Schlumberger Limited SLB recently announced an accord with Wellbore Integrity Solutions, a subsidiary of a private equity firm.

The deal entails the largest oilfield service player’s intention to divest several drilling assets that are not complementing its business for a consideration of roughly $400 million. The agreement is likely to close by 2019-end.

Schlumberger added that its centre of interest is to develop a core drilling strategy with the sale of non-core assets. Notably, the company’s core strategy includes developing technologies related to automation. The non-core operations that Schlumberger has agreed to sell include businesses and related properties of Thomas Tools, DRILCO, and Fishing and Remedial services.

Overall, focus on core business areas is likely to help Schlumberger continue to reward investors with solid free cash flow. Notably, in the trailing 12 months, Schlumberger’s free cashflow totaled $3.4 billion.

Based in Houston, TX, Schlumberger is the world’s largest energy equipment and services firm.

Schlumberger Limited Price


Schlumberger Limited Price

Schlumberger Limited price | Schlumberger Limited Quote


Investors should know that along with the recent first-quarter 2019 result announcement, the company added that explorers and producers are constrained by the reduction in capacity for borrowings and increase in cost of capital. Also, explorers are facing constant pressure from investors for higher returns instead of production growth. The headwinds are likely to lower investments by explorers and producers in the land market of North America by 10% through 2019, expects Schlumberger. Lower spending by the upstream firms is likely to hurt demand for the company’s North American oilfield services.

However, outlook for the company’s oilfield services contracts in the international market is quite the contrary. This is because Schlumberger expects an improvement in the international markets where the count of drilling rigs is rising and final investment decisions for clients’ projects are on the rise. The tailwinds are supporting Schlumberger’s projection of 7 to 8% rise in spending by upstream energy firms through 2019 in international markets.

Presently, Schlumbergercarries a Zacks Rank #3 (Hold). Meanwhile, a few better-ranked players in the energy space are Enterprise Products Partners LP EPD, Hess Corporation HES and Anadarko Petroleum Corporation APC. All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Enterprise Products has average positive earnings surprise of 17% for the last four quarters.

Hess is likely to witness earnings growth of 116.2% through 2019.

Anadarko Petroleum has average positive earnings surprise of 6.6% for the past four quarters.

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